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Although the Affordable Care Act has caused health insurance premiums to soar and restricted insurers from offering patients competitive plans, the federal government’s manipulation of the insurance market started as an unintended consequence of a labor policy created during World War II. The National War Labor Board fixed wages in 1943, during a period when the demand for workers was increasing while the supply of workers was dwindling. The wage cap, however, did not apply to fringe benefits, giving employers an incentive to sweeten employees’ deals with health insurance packages. After the war, Congress gave employers a similar incentive by exempting employer-provided health insurance packages from the tax code–a decision that snowballed into the establishment of Medicare, Medicaid, and–fast-forwarding 50 years–the Affordable Care Act.
So argues Dr. Gary Wolfram, director of the economics program and professor of political economy at Hillsdale College, in this episode of the Health Care News Podcast, hosted by Wolfram’s former student Michael T. Hamilton, the Heartland Institute’s research fellow for health care policy and managing editor of Health Care News.
Wolfram made a similar argument in a lecture as part of a free, online, not-for-credit Hillsdale College course available here and highly recommended.